Mumbai: Indian shares advanced for the third time in four days on Thursday, led by gains in state-run oil companies after the government allowed them to set diesel prices, despite uncertainty about the specifics of the announcement.

The government on Thursday paved the way for state-run Indian oil marketing companies to raise diesel prices in line with increases in global crude oil prices, a move that could help the government reduce its vast subsidy bill.

Analysts say fiscal consolidation alongside reversal of rate cycle are equally important for the market to move higher from current levels.

“Increase in diesel prices is the first step towards coming out of the twin deficit problem, so it should ensure better times for the market ahead,” said Deven Choksey, managing director at KR Choksey Securities.

The benchmark BSE index, Sensex, rose 0.74%, or 146.40 points, to end at 19,964.03.

The broader NSE index, the Nifty, rose 0.62%, or 37.35 points, to end at 6,039.20, closing above the psychologically important 6,000 level for the fourth day.

Investors are betting that a good showing by the top companies in India’s $100 billion-a-year outsourcing industry is an early sign of a broader pickup in IT spending. Reflecting that optimism, the country’s IT services sub-index has surged more than 13 percent in almost a week. HCL Technologies gained 4.3% after hitting its highest since February 2000. Infosys Ltd rose 0.91% while TCS ended 1.05% higher.

Wipro gained 2.63% after UBS raised its ratings to ‘buy’ from ‘sell’, saying revenue momentum will start picking up from the October-December quarter.

However, among stocks that fell, India’s Bajaj Auto Ltd dropped 1.14% after Deutsche Bank AG downgraded the stock to ‘hold’ from ‘buy’, saying current valuations are already factored in the company’s “strong” margin performance but do not account for the risks in an “uncertain” demand environment.

UBS remained bullish on Indian shares, but said returns in 2013 would be front-loaded as the first half would be supported by an easing rate cycle and on expectations of a “market-friendly” budget for FY14. Reuters